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Who needs economic growth anyway?


IF you’ve ever come across someone called Anne Richards, the chances are it is not the person I’m about to write about. She is not well known to the public.

But it is worth understanding a bit about her because she is influential and through that influence is trying to undermine the fundamental principle by which most businesses operate, and the mechanism by which humanity has risen out of poverty into relative and absolute prosperity.

It has resulted in a system that has delivered, directly and indirectly, a collapse in the global number of people who are hungry, sick, illiterate and often dying young.

This mechanism is economic growth. It largely comes from free enterprise driven by companies owned by shareholders (from one to millions), whose prime objective is to make money by creating products and services that are needed and wanted by other businesses and by individuals.

The Anne Richards I am talking about is chief executive of Fidelity International, one of the largest asset managers in the world with $419billion under management, who spoke at a Financial Times City Network event earlier this month. Alongside her was a founder of the ultra-regressive, nihilistic and anti-economic growth Extinction Rebellion which, along with the Greens, wants us to give up the use of fossil fuels, on which the world, especially its poorest people, depends.

These new-found friends must have been surprised to get the support of previously capitalist and free-market-supporting asset managers whom they still vilify for investing in companies which produce carbon dioxide. But such is the need for Ms Richards and her fellow titans of the fund management industry to look virtuous by supporting extreme climate policies that they were saying similar things.

Ms Richards reportedly said that the world must end ‘our obsession with ever-increasing GDP’ and ‘the primacy of shareholders’ in the name of the environment. No detailed alternative to the wealth creation mechanism was put forward.

Also missing was any acknowledgement that profitable businesses, driven by maintaining and growing the return to shareholders, provide the financial resources to government through goods and services that are taxable and employees who pay taxes.

Another bigwig from the fund management industry, Andreas Utermann, chief executive of Germany’s Allianz Global Investors, reportedly told the audience that ‘nominal GDP growth supported by population growth, [and profit] growth was clearly unsustainable’.

But it isn’t at all clear that it is unsustainable. For one thing, population growth rapidly declines with increased wealth and is flat to declining in all the fully developed countries, aside from immigration.

The word sustainable has lost its meaning, becoming a demonising word of accusation to warn those who wish to see growth and wealth creation. 

Developed countries which have become wealthy through economic growth are quickly becoming less polluted and more environmentally friendly, partly because they can afford to and partly because it is now clear how the environment can be damaged.

Technology, and profit-hungry businesses applying it, will create ever more opportunities for cleaner and less resource-intensive products and services.

But the miserabilist Greens and their virtue-signalling supporters like Ms Richards cannot show that the world is in any way running out of resources. It isn’t and will not be in the foreseeable future.

The stakeholder, rather than shareholder, approach she wants exists already and is visible in the report and accounts of every major company. Employees, customers, the environment and local community clearly matter to them and they invest in them all. These big companies with a predominantly shareholder focus are also major charitable givers. It is normal for each of them to give tens of millions of pounds to charities every year despite their focus on providing value to owners.

Ms Richards and her fellow campaigners fail to recognise the fundamental truth that businesses focused on making money for their owners are intrinsically valuable to society by virtue of the jobs they provide, which in turn creates the money for employees to spend in the economy and pay to government for public services. 

Ms Richards is a pillar of the establishment, a CBE and CVO, who earned £3million in 2017 in her previous City-based CEO role. She would personally be little affected by the misery caused by dropping economic growth as a virtuous and wealth-creating vehicle. Ironically, it is that economic growth system that has made her wealthy and given her a top-tier job when her proposal would make so many other people poor.

That the establishment has adopted such a radical anti-capitalist and retrograde agenda is extraordinary and symptomatic of the power of the green agenda and its most extreme adherents who have little support among the population at large and rarely win in elections as a result.

From her fund management experience Ms Richards must know that it’s worth following financial models and people with good track records. Economic growth has a record as a demonstrable good for humanity that is hard to match. It pays for almost everything, including Ms Richards’s not inconsiderable remuneration.

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Peter Lloyd
Peter Lloyd
Peter Lloyd is a former stockbroker and financial markets research professional.

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